Question
Asked Dec 18, 2019
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(Figure: Costs of Oil Production) Refer to the figure. Assuming that price equals marginal cost, the profit of producing eight barrels of oil is:
   
    $160.
    $400
    It cannot be determined from the information given.
    $240.
Marginal
Avorage
$50
30
15
Quantity
(barrels of oil)
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Marginal Avorage $50 30 15 Quantity (barrels of oil)

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Expert Answer

Step 1

Total profit refers to the remaining total revenue of a firm after deducting all the costs.

Step 2

In the given information, the price of 8 barrels of oil is $50, which is equal to the marginal costs of the firm and the average...

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Profit = Total revenue – Total cost Total revenue = Pricex Quantity = 8x 50 = 400 Total cost = Average costx Price = 30x8 = 240 Profit = 400-240 =160

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